|Publication number||US7313544 B1|
|Application number||US 09/702,728|
|Publication date||Dec 25, 2007|
|Filing date||Nov 1, 2000|
|Priority date||Nov 1, 2000|
|Also published as||WO2002037735A2, WO2002037735A3|
|Publication number||09702728, 702728, US 7313544 B1, US 7313544B1, US-B1-7313544, US7313544 B1, US7313544B1|
|Inventors||Evan Lawrence Bryman|
|Original Assignee||Capital One Financial Corporation|
|Export Citation||BiBTeX, EndNote, RefMan|
|Patent Citations (13), Non-Patent Citations (4), Referenced by (2), Classifications (31), Legal Events (3)|
|External Links: USPTO, USPTO Assignment, Espacenet|
1. Field of the Invention
The present invention is related to credit card products and to systems and methods for preventing the credit limit from being exceeded for such products.
2. Background of the Invention
Credit card products have become so universally well known and ubiquitous that they have fundamentally changed the manner in which financial transactions and dealings are viewed and conducted in society today. Credit card products are most commonly represented by plastic card-like members that are offered and provided to customers through credit card issuers (such as banks and other financial institutions). With a credit card, an authorized customer or cardholder is capable of purchasing services and/or merchandise without an immediate, direct exchange of cash. With each purchase, the cardholder incurs debt which the cardholder may thereafter pay upon receipt of a monthly or otherwise periodic statement. In most cases, the cardholder will have the option to either fully pay the outstanding balance or, as a matter of necessity or choice, defer at least a portion or the balance for later payment with accompanying interest or finance charges for the period during which payment of the outstanding debt is deferred.
The spending power of a credit card (i.e., the total amount of funds available to the cardholder at any particular time for making purchases) is typically limited to a particular amount predetermined by the issuer of the card. This amount is commonly referred to as the “credit limit” of the credit card. When purchases are made or debts incurred with the credit card, the available portion of the credit limit is reduced by the purchase or debt amounts. In addition, interest and/or finance charges are also subtracted from the available portion of the credit limit on a periodic basis. The total debits on a credit card are referred to as the “outstanding balance”, while the remaining or available balance of the credit limit is typically called the “available balance” and reflects the dynamically adjusted current spending power of the credit card. The cardholder may increase the available balance up to the credit limit, by paying to the issuer (or its representative) the entire outstanding balance or a fractional portion thereof.
When a payment is received by the issuer, it is sent to a bank or other financial institution for processing. Processing of the payment may range from 15-45 days. If the payment clears, it is called a “good payment”, and funds are distributed to the issuer. Similarly, if the payment bounces due to insufficient funds or a non-existent account, it is called a “bad payment”, and the issuer receives no funds.
When an issuer receives a bad payment, it temporarily increases the customer's available balance, even though it will not receive any funds from the payment. This is because the issuer increases the available balance before determining whether the payment is good. Usually, the issuer learns the payment is bad about 21 days after its receipt and lowers the available balance accordingly. Although most cardholders bounce payments accidentally, some cardholders purposefully mail bad payments. They use the increased available balance to make additional purchases that will exceed their credit limit. This behavior is called “check kiting”.
Credit card issuers are particularly vulnerable to check kiting. Although most issuers restrict accounts for general misuse, they do not specifically target accounts exhibiting check kiting behavior. For example, an issuer may employ a method that restricts an account with an outstanding balance that is extremely over its authorized credit limit. During restriction the customer cannot make purchases or cash advances with the credit card product.
In this example, the account may have an outstanding balance that is twice its limit or thousands over its limit. The account may be over limit due to check kiting or other fraudulent means. For example, a merchant may approve a purchase, knowing that the account does not have sufficient available credit. In this case, the customer is punished even though he did not purposefully kite his payment. Further, many customers who are guilty of check kiting are not stopped because their accounts are not extremely over limit.
Similarly, an issuer may use an alternative method that restricts an account if the customer has previously bounced two or more payments. As described above, most bounced payments are not due to check kiting. Thus, when an issuer uses this method, every customer who accidentally bounces a payment more than once, for example, is restricted. While the first method permits check kiting behavior in too many accounts, this method restricts many accounts that are not check kiting.
In view of the foregoing, there is presently a need for an improved system and method for responding to and preventing check kiting behavior on credit card products.
Systems and methods consistent with the principles of the present invention address the need to reduce fraud on a financial account. Specifically, systems and methods consistent with the invention may identify an account for potential fraud based on payments made to the account, review account transactions of the identified account to determine whether fraud has been made on the account, and restrict the identified account.
Further, systems and methods consistent with the invention may identify an account by locating an account having a bad payment, determining whether the bad payment made an outstanding balance of the account over a predetermined limit, and flagging the account for review when the bad payment made the outstanding balance of the account over the predetermined limit. Similarly, systems and methods consistent with the invention may identify an account by locating an account having a bad payment, determining whether an outstanding payment would make the outstanding balance of the account over the predetermined limit if it the payment is bad, and flagging the account for review when the outstanding payment would make the outstanding balance of the account over the predetermined limit if it is bad.
Still further, systems and methods consistent with the invention may review the account by comparing the number of good payments made on the account to a good payment threshold, determining an over limit credit amount that an outstanding balance of the account has exceeded a predetermined limit at a specific time, determining a total over limit credit amount by totaling each over limit credit amount during a predetermined time period, comparing the total over limit credit amount with an over limit threshold, and restricting the account when the number of good payments is less than the good payment threshold and the total over limit credit amount is greater than the over limit threshold.
According to another aspect of the invention, a computer program is provided for reducing fraud on a financial account. The computer program product may comprise computer-readable media having computer-readable code, wherein the computer program product comprises the following computer-readable program code for effecting actions in a computing platform: program code for identifying an account for potential fraud based on payments made to the account, program code for reviewing account transactions of the identified account to determine whether fraud has been made on the account, and program code for restricting the identified account.
It is to be understood that both the foregoing general description and the following detailed description are exemplary and explanatory only and are not restrictive of the invention, as claimed.
The accompanying drawings, which are incorporated in and constitute a part of this specification, illustrate one embodiment of the invention and together with the description, serve to explain the principles of the invention. In the drawings:
Systems and methods consistent with the present invention protect credit card issuers from authorized cardholders or customers who are check kiting. The method determines whether a customer is check kiting and restricts the accounts of those customers who are check kiting. More specifically, the method analyzes the accounts of customers who have bounced payments to determine: (1) if they have exceeded their credit limit due to the bounced payments; and (2) if they will exceed their credit limit if a recent check bounces. If either situation is true, the account is reviewed to determine whether the customer is check kiting.
During the review, the method counts the number of good payments and the amount the account has become over limit due to bounced checks over the account's lifetime. These totals are compared with predetermined thresholds. If the number of good payments is less than the good payment threshold and the total of the over limit amount is greater than the over limit threshold, the method determines that the cardholder is check kiting and restricts the account. While the account is restricted, the customer cannot make any purchases or cash advances with the credit card.
The above-noted features and other aspects and principles of the present invention may be implemented in various system or network environments to provide automated computational tools to facilitate data collection and risk analysis. Such environments and applications may be specially constructed for performing the various processes and operations of the invention or they may include a general purpose computer or computing platform selectively activated or reconfigured by program code to provide the necessary functionality. The processes disclosed herein are not inherently related to any particular computer or other apparatus, and may be implemented by a suitable combination of hardware, software, and/or firmware. For example, various general purpose machines may be used with programs written in accordance with the teachings of the invention, or it may be more convenient to construct a specialized apparatus or system to perform the required methods and techniques. The present invention also relates to computer readable media that include program instruction or program code for performing various computer-implemented operations based on the methods and processes of the invention. The media and program instructions may be those specially designed and constructed for the purposes of the invention, or they may be of the kind well-known and available to those having skill in the computer software arts. Examples of program instructions include both machine code, such as produced by compiler, and files containing a high level code that can be executed by the computer using an interpreter.
By way of a non-limiting example,
In the embodiment of
Alternatively, communication between computing platform 300 and modules 100, 200 can be achieved through the use of a network architecture (not shown). In the alternative embodiment (not shown), the network architecture may comprise, alone or in any suitable combination, a telephony-based network (such as a PBX or POTS), a local area network (LAN), a wide area network (WAN), a dedicated intranet, and/or the Internet. Further, it may comprise any suitable combination of wired and/or wireless components and systems. By using dedicated communication links or a shared network architecture, computing platform 300 may be located in the same location or at a geographically distant location from input module 100 and/or output module 200.
Input module 100 of system environment 50 may be implemented with a wide variety of devices to receive and/or provide the data as input to computing platform 300. As illustrated in
As illustrated in
In accordance with the principles of the present invention, an exemplary process for determining whether a customer is check kiting will now be described with reference to
If the customer has made a bounced payment, computing platform 300 determines whether the account became “over limit” (i.e. the outstanding balance became higher than the credit limit) due to the bounced payment (step S.20). As described above, when a customer makes a payment on an account with outstanding balance, computing platform 300 decreases the outstanding balance and increases the available balance. However if the payment was bad, it will take approximately 15-45 days to bounce. During this time, the customer can make purchases or cash advances that will cause the account to exceed its credit limit.
If the account did not become over limit as a result of payment bouncing, computing platform 300 considers whether the account would become over limit if an outstanding payment bounces (step S.30). For example, computing platform 300 may consider any purchases or cash advances made since the payment was posted to determine whether the outstanding balance would exceed the credit limit if it were increased by the amount of the recent payment. If the account did not become over limit due to the bounced payment and would not become over limit if an outstanding payment bounces, no action is taken on the account (step S.50). Otherwise, the account is flagged for further review (step S.40).
Each of the above steps for identifying accounts with possible check kiting activity are performed automatically by computing platform 300 or a similar device. Once an account is flagged, computing platform 300 or a similar device reviews the a account to determine whether the cardholder is check kiting.
By considering the number of good payments, the issuer can determine more accurately whether the cardholder is check kiting. For example, a cardholder who regularly makes good payments may have accidentally made a bad payment. In this case, the customer may have made purchases after the payment was made, not knowing the payment would bounce and his credit limit would be exceeded. Because this was likely a fluke occurrence, the issuer does not restrict the account. However, if the customer has not met the minimum threshold of good payments, the bounced payment is less likely to be a fluke, and more likely to be fraud.
Therefore, if the customer has not met the threshold number of good payments, computing platform 300 considers the lifetime amount of purchases or cash advances that have become over limit due to bounced payments and compares it with a predetermined threshold “m” (step S.70). Specifically, for each bounced payment, computing platform 300 determines the amount of purchases or cash advances made between the time a payment was posted and the time it bounced, and when there was no pre-existing available credit. Computing platform 300 sums the amount the credit limit was exceeded for each bad payment received, obtaining a lifetime over limit total.
If this total is less than or equal to the over limit threshold “m”, no action is taken on the account (step S.90). However, if the total exceeds the over limit threshold and the number of good payments is less than the good payment threshold, then computing platform 300 may restrict the account (step S.80).
In a preferred embodiment, the over limit threshold is $200. However, one skilled in the art will appreciate that countless other values may be used. Although the process of determining whether a cardholder is check kiting has been described as an automated process performed by computing platform 300 or a similar device, those skilled in the art will recognize the account may be reviewed manually in an alternative embodiment.
Once a cardholder's account is restricted, he will not be able to make additional purchases or cash advances until the restriction is lifted. The restriction may be lifted by the issuer when deemed appropriate. In a preferred embodiment, the issuer may lift the restriction when the account is brought under-limit by cleared checks.
Systems consistent with the present invention overcome the shortcomings of conventional apparatus and methods for preventing loss due to check kiting. By determining whether a customer exhibits check kiting behavior, as described herein, systems and methods of the invention as disclosed herein minimize risk to credit card issuers susceptible to fraud.
Other embodiments of the invention will be apparent to those skilled in the art from consideration of the specification and practice of the invention disclosed herein. The present invention is not limited for use with credit card products and may be used with any financial account, in which a customer may make purchases using bad payments. For example, in another embodiment, the invention may be applied to a debit card, such as a stored value card. With a stored value card, the customer mails a payment to the issuer, which is credited to the customer's account for subsequent purchases. If the payment is bad, the customer may purchase goods for which the issuer does not receive payment. Similarly, the invention could be used with a checking account. It is intended that the specification and examples be considered as exemplary only, with a true scope and spirit of the invention being indicated by the following claims.
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|U.S. Classification||705/39, 235/380, 705/38, 705/37, 235/379, 705/44, 705/40, 705/35|
|International Classification||G06Q40/00, G06Q20/40, G06Q20/10, G06Q20/04, G07F7/08|
|Cooperative Classification||G06Q20/102, G07F7/08, G06Q20/40, G06Q40/04, G06Q20/403, G06Q40/00, G06Q20/042, G06Q40/025, G06Q20/10|
|European Classification||G06Q20/042, G06Q40/025, G06Q40/00, G06Q20/403, G06Q40/04, G06Q20/40, G06Q20/10, G06Q20/102, G07F7/08|
|Nov 1, 2000||AS||Assignment|
Owner name: CAPITAL ONE FINANCIAL CORPORATION, VIRGINIA
Free format text: ASSIGNMENT OF ASSIGNORS INTEREST;ASSIGNOR:BRYMAN, EVAN LAWRENCE;REEL/FRAME:011397/0011
Effective date: 20001031
|Jun 27, 2011||FPAY||Fee payment|
Year of fee payment: 4
|Jun 25, 2015||FPAY||Fee payment|
Year of fee payment: 8